USD/CAD Surges Ahead of BoC Decision Amid Rising Global Yields
The USD/CAD pair rose to a two-week high on Wednesday as the US Dollar gained strength due to rising global yields and heightened risk aversion. The Canadian Dollar, on the other hand, weakened for the second straight session.
The move came ahead of the Bank of Canada's interest rate announcement, with markets anticipating that the benchmark rate will remain unchanged at 2.25%. This expectation is based on a tariff dispute with the US and uncertainty related to the Middle East conflict, which are seen as weighing on Canada's economic outlook.
Despite softer US manufacturing and labor data, the Federal Reserve is still expected to hike interest rates in September. Strategists at Brown Brothers Harriman highlighted that Fed funds futures now price in 67% odds of a 25bps hike on September 16 and imply 60bps of tightening over the next twelve months.